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Rock the Vote?

When you're trying to help get a candidate elected, noncompliance with campaign rules can cost your business a lot more than just a fat donation check.
June 1, 2004
URL: http://www.entrepreneur.com/article/70960

It's an election year, and people are getting worried. Can your favorite candidate win? What would happen to your business if the wrong person took office? Is there anything you can do to help the campaign?

Before you commit your business to financial, volunteer or in-kind contributions, know the law. The Federal Election Campaign Act, designed to prohibit influence peddling, strictly regulates who can help finance a campaign for federal office and by how much. The Bipartisan Campaign Reform Act of 2002 tightened some rules, loosened others and made everything more complicated.

Some things haven't changed: No corporation or union may donate money or services to a federal election campaign. The Federal Election Commission is especially strict about this rule. However, a corporation or a union may form and finance a separate political action committee, which can host fund-raisers or solicit contributions from individuals.

If your business is a federal government contractor, you may not contribute to a federal election campaign from business funds, or, if you're a sole proprietor, from your own funds. This does not apply to partners, shareholders, officers and employees, who, like other individuals, are now allowed to contribute up to $2,000 each per campaign, plus up to $25,000 per year to a national party committee and $10,000 per year to state district and local party committees. (Note that these limits are higher under the new rules. The value of in-kind donations and services counts toward those limits.)

So can you just tell employees to contribute to a campaign? Definitely not. If you think electing a particular candidate would be good for business, you can encourage executives, administrative employees and stockholders, and their families to support the candidate. But it's not OK to tell rank-and-file employees to give money to a campaign, even if you reimburse them.

For instance, a Chicago telecommunications company pressured employees to buy tickets for a political fund-raiser. A supervisor circulated a memo urging them to buy tickets-with thinly veiled threats of termination if they didn't. The company raised $113,125 for the party-but had to pay a $150,000 penalty for violating election laws.

Likewise, a New York City car dealer hatched a plan with his congressman. He gave $2,000 "bonuses" to 29 current and former employees, told them to put the money in their personal bank accounts, and had husbands and wives each make a $1,000 donation to the congressman's re-election campaign. Suddenly, the campaign was getting large donations from secretaries and mechanics who'd never contributed before. The opposition uncovered the plot, the congressman was voted out of office, and the business owner landed in court.

In the same vein, don't direct employees to help with a political campaign. One exception: You can direct your company accountant, bookkeeper or lawyer to do financial record-keeping and file reports for a campaign to ensure a candidate complies with election laws. It's also illegal for a corporation to take out an ad in favor of a candidate.

Election law is more complicated than this column can cover. If in doubt, talk to your lawyer before you write the check.


Jane Easter Bahls is a writer in Rock Island, Illinois, specializing in business and legal topics.